Share-based Compensation and Employee Benefits (Notes)

12 Months Ended

Dec. 31, 2019

Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract]

Share-based Compensation and Employee Benefits

10.      Share-based Compensation and Employee Benefits

Share-based Compensation

Class P Shares

Kinder Morgan, Inc. Amended and Restated Stock Compensation Plan for Non-Employee Directors

We have a Kinder Morgan, Inc. Amended and Restated Stock Compensation Plan for Non-Employee Directors, in which our eligible non-employee directors participate.  The plan recognizes that the compensation paid to each eligible non-employee director is fixed by our board of directors, generally annually, and that the compensation is payable in cash.  Pursuant to the plan, in lieu of receiving some or all of the cash compensation, each eligible non-employee director may elect to receive shares of Class P common stock.  Each election will be generally at or around the first board of directors meeting in January of each calendar year and will be effective for the entire calendar year.  An eligible director may make a new election each calendar year.  The total number of shares of Class P common stock authorized under the plan is 250,000.  During 2019, 2018 and 2017, we made restricted Class P common stock grants to our non-employee directors of 23,100, 25,800 and 17,740, respectively. These grants were valued at time of issuance at $400,000, $500,000 and $400,000, respectively. All of the restricted stock awards made to non-employee directors vest during a six-month period.

Kinder Morgan, Inc. 2015 Amended and Restated Stock Incentive Plan

The Kinder Morgan, Inc. 2015 Amended and Restated Stock Incentive Plan is an equity awards plan available to eligible employees.  The total number of shares of Class P common stock authorized under the plan is 33,000,000. The following table sets forth a summary of activity and related balances of our restricted stock awards excluding that issued to non-employee directors (in millions, except share and per share amounts):

	Year Ended				Year Ended				Year Ended
	December 31, 2019				December 31, 2018				December 31, 2017
	Shares		Weighted Average Grant Date Fair Value per Share		Shares		Weighted Average Grant Date Fair Value per Share		Shares		Weighted Average Grant Date Fair Value per Share
Outstanding at beginning of period	13,154,605		$	22.59	10,518,344		$	28.21	9,038,137		$	32.72
Granted	3,791,674		20.46		5,389,476		17.73		3,221,691		19.52
Vested	(4,259,169	)	28.15		(2,371,193	)	36.34		(1,501,939	)	36.67
Forfeited	(273,554	)	21.22		(382,022	)	23.26		(239,545	)	28.34
Outstanding at end of period	12,413,556		20.07		13,154,605		22.59		10,518,344		28.21

The intrinsic value of restricted stock awards vested during the years ended December 31, 2019, 2018 and 2017 was $87 million, $42 million and $30 million, respectively. Restricted stock awards made to employees have vesting periods ranging from 1 year up to 10 years. Following is a summary of the future vesting of our outstanding restricted stock awards:

Year	Vesting of Restricted Shares
2020	3,271,081
2021	4,628,872
2022	3,356,768
2023	549,164
2024	127,173
Thereafter	480,498
Total Outstanding	12,413,556

During 2019, 2018 and 2017, we recorded $62 million, $63 million and $65 million, respectively, in expense related to restricted stock awards and capitalized approximately $12 million, $13 million and $9 million, respectively.  At December 31, 2019, unrecognized restricted stock awards compensation costs, less estimated forfeitures, was approximately $119 million with a weighted average remaining amortization period of 2.23 years.

Pension and Other Postretirement Benefit (OPEB) Plans

Savings Plan

We maintain a defined contribution plan covering eligible U.S. employees. We contribute 5% of eligible compensation for most of the plan participants. Certain collectively bargained participants receive Company contributions in accordance with collective bargaining agreements. A participant becomes fully vested in Company contributions after two years and may take a distribution upon termination of employment or retirement. The total cost for our savings plan was approximately $50 million, $48 million, and $47 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Pension Plans

Our pension plans are defined benefit plans that cover substantially all of our U.S. employees and provide benefits under a cash balance formula. A participant in the cash balance formula accrues benefits through contribution credits based on a combination of age and years of service, multiplied by eligible compensation. Interest is also credited to the participant’s plan account. A participant becomes fully vested in the plan after three years and may take a lump sum or annuity distribution upon termination of employment or retirement. Certain collectively bargained and grandfathered employees accrue benefits through career pay or final pay formulas.

OPEB Plans

We and certain of our subsidiaries provide OPEB benefits, including medical benefits for closed groups of retired employees and certain grandfathered employees and their dependents, and limited postretirement life insurance benefits for retired employees. These plans provide a fixed subsidy to post-age 65 Medicare eligible participants to purchase coverage through a retiree Medicare exchange. Medical benefits under these OPEB plans may be subject to deductibles, co-payment provisions, dollar caps and other limitations on the amount of employer costs, and we reserve the right to change these benefits.

Additionally, our subsidiary SFPP has incurred certain liabilities for postretirement benefits to certain current and former employees, their covered dependents, and their beneficiaries. However, the net periodic benefit costs, contributions and liability amounts associated with the SFPP postretirement benefit plan are not material to our consolidated income statements or balance sheets.

Plans Associated with Foreign Operations

Two of our former subsidiaries, Kinder Morgan Canada Inc. and Trans Mountain Pipeline ULC (as general partner of Trans Mountain Pipeline L.P.), were sponsors of pension and OPEB plans for eligible Canadian and Trans Mountain pipeline employees.  These subsidiaries, along with the plan assets of the Canadian pension and OPEB plans, were sold on August 31, 2018 (see Note 3). In conjunction with the TMPL Sale, Kinder Morgan Canada Services was formed and became the Canadian employer of the staff that operated our remaining Canadian assets. Kinder Morgan Canada Services subsequently established a defined contribution pension plan and an OPEB plan for eligible Canadian employees which are not material to our consolidated income statements and balance sheets, and therefore are excluded from the following disclosures. Kinder Morgan Canada Services and the related benefit plans were subsequently disposed of as part of the KML and U.S. Cochin Sale (see Note 3).

Benefit Obligation, Plan Assets and Funded Status. The following table provides information about our pension and OPEB plans as of and for each of the years ended December 31, 2019 and 2018 (in millions):

	Pension Benefits						OPEB
	2019			2018			2019			2018
Change in benefit obligation:
Benefit obligation at beginning of period	$	2,566		$	2,982		$	339		$	425
Service cost	53			52			1			1
Interest cost	96			84			12			12
Actuarial loss (gain)	159			(172		)	10			(53		)
Benefits paid	(178		)	(175		)	(32		)	(33		)
Participant contributions	—			—			2			1
Medicare Part D subsidy receipts	—			—			1			1
Other(a)	—			(205		)	—			(15		)
Benefit obligation at end of period	2,696			2,566			333			339

Change in plan assets:
Fair value of plan assets at beginning of period	1,864			2,296			306			335
Actual return on plan assets	330			(128		)	49			(5		)
Employer contributions	60			30			7			7
Participant contributions	—			—			2			1
Medicare Part D subsidy receipts	—			—			1			1
Benefits paid	(178		)	(175		)	(32		)	(33		)
Other(a)	—			(159		)	—			—
Fair value of plan assets at end of period	2,076			1,864			333			306
Funded status - net liability at December 31,	$	(620	)	$	(702	)	$	—		$	(33	)

_______

(a) 2018 amounts represent December 31, 2017 balances associated with Canadian pension and OPEB plans that were included in the TMPL Sale.

Components of Funded Status. The following table details the amounts recognized in our balance sheets at December 31, 2019 and 2018 related to our pension and OPEB plans (in millions):

	Pension Benefits						OPEB
	2019			2018			2019			2018
Non-current benefit asset(a)	$	—		$	—		$	231		$	190
Current benefit liability	—			—			(18		)	(13		)
Non-current benefit liability	(620		)	(702		)	(213		)	(210		)
Funded status - net liability at December 31,	$	(620	)	$	(702	)	$	—		$	(33	)

_______

(a) 2019 and 2018 OPEB amounts include $39 million and $32 million, respectively, of non-current benefit assets related to a plan we sponsor which is associated with employee services provided to an unconsolidated joint venture, and for which we have recorded an offsetting related party deferred credit.

Components of Accumulated Other Comprehensive (Loss) Income. The following table details the amounts of pre-tax accumulated other comprehensive (loss) income at December 31, 2019 and 2018 related to our pension and OPEB plans which are included on our accompanying consolidated balance sheets (in millions):

	Pension Benefits						OPEB
	2019			2018			2019		2018
Unrecognized net actuarial (loss) gain	$	(557	)	$	(653	)	$	123	$	117
Unrecognized prior service (cost) credit	(3		)	(3		)	12		14
Accumulated other comprehensive (loss) income	$	(560	)	$	(656	)	$	135	$	131

We anticipate that approximately $25 million of pre-tax accumulated other comprehensive loss, inclusive of amounts reported as noncontrolling interests, will be recognized as part of our net periodic benefit cost in 2020, including approximately $27 million of unrecognized net actuarial loss and approximately $2 million of unrecognized prior service credit.

Our accumulated benefit obligation for our pension plans was $2,659 million and $2,535 million at December 31, 2019 and 2018, respectively.

Our accumulated postretirement benefit obligation for our OPEB plans, whose accumulated postretirement benefit obligations exceeded the fair value of plan assets, was $288 million and $293 million at December 31, 2019 and 2018, respectively. The fair value of these plans’ assets was approximately $57 million and $70 million at December 31, 2019 and 2018, respectively.

Plan Assets. The investment policies and strategies are established by our plan’s fiduciary committee for the assets of each of the pension and OPEB plans, which are responsible for investment decisions and management oversight of the plans. The stated philosophy of the fiduciary committee is to manage these assets in a manner consistent with the purpose for which the plans were established and the time frame over which the plans’ obligations need to be met. The objectives of the investment management program are to (i) meet or exceed plan actuarial earnings assumptions over the long term and (ii) provide a reasonable return on assets within established risk tolerance guidelines and to maintain the liquidity needs of the plans with the goal of paying benefit and expense obligations when due. In seeking to meet these objectives, the fiduciary committee recognizes that prudent investing requires taking reasonable risks in order to raise the likelihood of achieving the targeted investment returns. In order to reduce portfolio risk and volatility, the Fiduciary Committee has adopted a strategy of using multiple asset classes.

As of December 31, 2019, the allowable range for asset allocations in effect for our pension plan were 34% to 59% equity, 37% to 57% fixed income, 0% to 5% cash, 0% to 2% alternative investments and 0% to 10% company securities (KMI Class P common stock and/or debt securities).  As of December 31, 2019, the allowable range for asset allocations in effect for our OPEB plans were 45% to 68% equity, 25% to 50% fixed income and 0% to 22% cash.

Below are the details of our pension and OPEB plan assets by class and a description of the valuation methodologies used for assets measured at fair value.

• Level 1 assets’ fair values are based on quoted market prices for the instruments in actively traded markets. Included in this level are cash, equities and exchange traded mutual funds. These investments are valued at the closing price reported on the active market on which the individual securities are traded.

• Level 2 assets’ fair values are primarily based on pricing data representative of quoted prices for similar assets in active markets (or identical assets in less active markets). Included in this level are short-term investment funds, fixed income securities and derivatives. Short-term investment funds are valued at amortized cost, which approximates fair value. The fixed income securities’ fair values are primarily based on an evaluated price which is based on a compilation of primarily observable market information or a broker quote in a non-active market. Derivatives are exchange-traded through clearinghouses and are valued based on these prices.

• Level 3 assets’ fair values are calculated using valuation techniques that require inputs that are both significant to the fair value measurement and are unobservable, or are similar to Level 2 assets. Included in this level are guaranteed insurance contracts which are valued at contract value, which approximates fair value.

• Plan assets with fair values that are based on the net asset value per share, or its equivalent (NAV), as reported by the issuers are determined based on the fair value of the underlying securities as of the valuation date and include common/collective trust funds, private investment funds and limited partnerships. The plan assets measured at NAV are not categorized within the fair value hierarchy described above, but are separately identified in the following tables.

Listed below are the fair values of our pension and OPEB plans’ assets that are recorded at fair value by class and categorized by fair value measurement used at December 31, 2019 and 2018 (in millions):

	Pension Assets
	2019								2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Measured within fair value hierarchy
Short-term investment funds	$	—	$	50	$	—	$	50	$	—	$	7	$	—	$	7
Mutual funds(a)	—		—		—		—		81		—		—		81
Equities(b)	296		—		—		296		227		—		—		227
Fixed income securities(c)	—		405		—		405		—		422		—		422
Derivatives	—		12		—		12		—		6		—		6
Subtotal	$	296	$	467	$	—	763		$	308	$	435	$	—	743
Measured at NAV(d)
Common/collective trusts(e)							1,069								857
Private investment funds(f)							200								215
Private limited partnerships(g)							44								49
Subtotal							1,313								1,121
Total plan assets fair value							$	2,076							$	1,864

_______

(a) Includes mutual funds which are invested in equity.

(b) Plan assets include $129 million and $94 million of KMI Class P common stock for 2019 and 2018, respectively.

(c) Plan assets include $1 million of KMI debt securities for 2019.

(d) Plan assets which used NAV as a practical expedient to measure fair value.

(e) Common/collective trust funds were invested in approximately 32% fixed income and 68% equity in 2019 and 37% fixed income and 63% equity in 2018.

(f) Private investment funds were invested in approximately 73% fixed income and 27% equity in 2019 and 71% fixed income and 29% equity in 2018.

(g) Includes assets invested in real estate, venture and buyout funds.

	OPEB Assets
	2019								2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Measured within fair value hierarchy
Cash	$	1	$	—	$	—	$	1	$	—	$	—	$	—	$	—
Short-term investment funds	—		5		—		5		—		4		—		4
Equities	25		—		—		25		—		—		—		—
Fixed income securities	—		17		—		17		—		—		—		—
Guaranteed insurance contracts	—		—		—		—		—		—		51		51
Mutual funds(a)	11		—		—		11		1		—		—		1
Subtotal	$	37	$	22	$	—	59		$	1	$	4	$	51	56
Measured at NAV(b)
Common/collective trusts(c)							274								250
Subtotal							274								250
Total plan assets fair value							$	333							$	306

_______

(a) Includes mutual funds which are invested in equities and fixed income securities.

(b) Plan assets which used NAV as a practical expedient to measure fair value.

(c) Common/collective trust funds were invested in approximately 64% equity and 36% fixed income securities for 2019 and 60% equity and 40% fixed income securities for 2018.

The following table presents the changes in our OPEB plans’ assets included in Level 3 for the years ended December 31, 2019 and 2018 (in millions):

	OPEB Assets
	Balance at Beginning of Period		Transfers In (Out)(a)			Realized and Unrealized Gains (Losses), net		Purchases (Sales), net			Balance at End of Period
2019
Guaranteed insurance contracts	$	51	$	(49	)	$	—	$	(2	)	$	—
2018
Guaranteed insurance contracts	$	49	$	—		$	4	$	(2	)	$	51

_______

(a) Guaranteed insurance contracts were canceled and the individual securities within the contracts were transferred in-kind to Level 1 or Level 2.

Changes in the underlying value of Level 3 assets due to the effect of changes of fair value were immaterial for the years ended December 31, 2019 and 2018.

Expected Payment of Future Benefits and Employer Contributions. As of December 31, 2019, we expect to make the following benefit payments under our plans (in millions):

Fiscal year	Pension Benefits		OPEB(a)
2020	$	239	$	32
2021	230		31
2022	229		30
2023	218		29
2024	212		27
2025 - 2029	939		115

_______

(a) Includes a reduction of approximately $1 million in each of the years 2020 through 2024 and approximately $6 million in aggregate for the period 2025 - 2029 for an expected subsidy related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

In 2020, we expect to contribute approximately $71 million to our pension plans and $7 million, net of anticipated subsidies, to our OPEB plans.

Actuarial Assumptions and Sensitivity Analysis. Benefit obligations and net benefit cost are based on actuarial estimates and assumptions. The following table details the weighted-average actuarial assumptions used in determining our benefit obligation and net benefit costs of our pension and OPEB plans for 2019, 2018 and 2017:

	Pension Benefits						OPEB
	2019		2018		2017		2019		2018		2017
Assumptions related to benefit obligations:
Discount rate	3.17	%	4.26	%	3.56	%	3.03	%	4.16	%	3.48	%
Rate of compensation increase	3.50	%	3.50	%	3.53	%	n/a		n/a		n/a
Assumptions related to benefit costs:
Discount rate for benefit obligations	4.26	%	3.56	%	3.83	%	4.16	%	3.48	%	3.69	%
Discount rate for interest on benefit obligations	3.89	%	3.13	%	3.09	%	3.83	%	3.08	%	3.05	%
Discount rate for service cost	4.28	%	3.56	%	3.88	%	4.51	%	3.82	%	4.15	%
Discount rate for interest on service cost	3.93	%	3.14	%	3.24	%	4.46	%	3.76	%	3.95	%
Expected return on plan assets(a)	7.25	%	7.25	%	7.07	%	6.50	%	7.08	%	6.84	%
Rate of compensation increase	3.50	%	3.50	%	3.52	%	n/a		n/a		n/a

_______

(a) The expected return on plan assets listed in the table above is a pre-tax rate of return based on our targeted portfolio of investments. For the OPEB assets subject to unrelated business income taxes (UBIT), we utilize an after-tax expected return on plan assets to determine our benefit costs, which is based on a UBIT rate of 27% for 2019 and 21% for 2018 and 2017.

We utilize a full yield curve approach in the estimation of the service and interest cost components of net periodic benefit cost (credit) for our retirement benefit plans by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows. The expected long-term rates of return on plan assets were determined by combining a review of the historical returns realized within the portfolio, the investment strategy included in the plans’ investment policy, and capital market projections for the asset classes in which the portfolio is invested and the target weightings of each asset class.

Actuarial estimates for our OPEB plans assume an annual increase in the per capita cost of covered health care benefits; the initial annual rate of increase is 8.38% which gradually decreases to 4.54% by the year 2038. Assumed health care cost trends could have a significant effect on the amounts reported for the OPEB plans. A one-percentage point change in assumed health care cost trends would have the following effects as of December 31, 2019 and 2018 (in millions):

	2019			2018
One-percentage point increase:
Aggregate of service cost and interest cost	$	1		$	1
Accumulated postretirement benefit obligation	14			16
One-percentage point decrease:
Aggregate of service cost and interest cost	$	—		$	(1	)
Accumulated postretirement benefit obligation	(12		)	(14		)

Components of Net Benefit Cost and Other Amounts Recognized in Other Comprehensive Income. For each of the years ended December 31, the components of net benefit cost and other amounts recognized in pre-tax other comprehensive income related to our pension and OPEB plans are as follows (in millions):

	Pension Benefits									OPEB
	2019			2018			2017			2019			2018			2017
Components of net benefit cost (credit):
Service cost	$	53		$	52		$	40		$	1		$	1		$	1
Interest cost	96			84			88			12			12			13
Expected return on assets	(129		)	(149		)	(147		)	(16		)	(20		)	(19		)
Amortization of prior service cost (credit)	—			—			1			(4		)	(4		)	(3		)
Amortization of net actuarial loss (gain)	54			40			52			(11		)	(6		)	(6		)
Curtailment and settlement loss	—			—			5			—			—			—
Net benefit cost (credit)	74			27			39			(18		)	(17		)	(14		)
Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss:
Net (gain) loss arising during period	(42		)	105			17			(17		)	(32		)	(25		)
Amortization or settlement recognition of net actuarial (loss) gain	(54		)	(87		)	(64		)	11			3			6
Amortization of prior service (cost) credit	—			(1		)	(1		)	2			3			1
Total recognized in total other comprehensive (income) loss	(96		)	17			(48		)	(4		)	(26		)	(18		)
Total recognized in net benefit cost (credit) and other comprehensive (income) loss	$	(22	)	$	44		$	(9	)	$	(22	)	$	(43	)	$	(32	)

Multiemployer Plans

We participate in several multi-employer pension plans for the benefit of employees who are union members.  We do not administer these plans and contribute to them in accordance with the provisions of negotiated labor contracts.  Other benefits include a self-insured health and welfare insurance plan and an employee health plan where employees may contribute for their dependents’ health care costs.  Amounts charged to expense for these plans were approximately $8 million for each of the years

ended December 31, 2019, 2018 and 2017. We consider the overall multi-employer pension plan liability exposure to be immaterial in relation to the value of its total consolidated assets and net income.

Adoption of Accounting Pronouncement

On January 1, 2018, we adopted ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715).” This ASU requires an employer to disaggregate the service cost component from the other components of net benefit cost, allows only the service cost component of net benefit cost to be eligible for capitalization and establishes how to present the service cost component and the other components of net benefit cost in the income statement. Topic 715 required us to retrospectively reclassify $15 million of other components of net benefit credits (excluding the service cost component) from “General and administrative” to “Other, net” in our accompanying consolidated statement of income for the year ended December 31, 2017. We prospectively applied Topic 715 related to net benefit costs eligible for capitalization.